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Jan 4 (Reuters) - Shares of online photo-sharing company Shutterfly Inc (SFLY.O) fell for a second straight day on Friday following a recent price cut on photo prints by rival Snapfish, a unit of Hewlett-Packard Co (HPQ.N).
Redwood City, California-based Shutterfly shares have lost more than one-fourth of their value from Wednesday’s closing price of $25.70. On Friday, the stock hit an intra-day low of $18.62 but recovered losses, closing down about 4 percent at $20.75 on the Nasdaq.
The shares have lost about half of their value in the last two months.
In late December, rival Snapfish cut its everyday price on 4x6 prints to 9 cents from 12 cents, raising concerns among investors that it may be the beginning of a new price war. Shutterfly charges 19 cents for the same size prints, while it costs 15 cents on Kodak Gallery.
Chief Executive Jeffrey Housenbold, in a conference call, said Shutterfly will not be impacted by the Snapfish price cut as the company has always been able to command premium pricing and is seeing faster growth in its personalized products and services segment, which include photo books, greeting cards and frames.
The company also said it is acquiring Nexo Systems Inc, a privately held online sharing services company that has developed a platform for creating customized Web sites.
On Friday at least one brokerage lowered its rating on Shutterfly.
“We believe it would be a challenge for the company to maintain a $0.10 pricing differential (regardless of customer demographics) without risking a potential slow-down in new customer growth,” American Technology Research analyst Brad Manuilow said in a note to clients.
Manuilow, who downgraded the stock to “neutral” from “buy,” said assuming a 20 percent price cut offset by higher unit volumes, 2008 earnings per share could be hurt by 10 percent to 20 percent.
While recent stock movement reflects uncertainty in prices, at least two analysts believe that prices may remain steady in the near future since Shutterfly’s higher-end customer base seems to be less price-sensitive.
The customers seem far more interested in quality, ease-of-use, functionality, and design, Cantor Fitzgerald’s analyst Derek Brown said in a research note dated Jan. 3.
Brown reiterated his “buy” rating on the company’s shares.
J.P. Morgan analyst Imran Khan said Shutterfly was the last one to lower prices during the last round of price cuts in 2005.
But Khan, who reiterated his “overweight” rating on the stock, said Shutterfly would continue to benefit from strong customer traffic. (Reporting by Purwa Naveen Raman and John Tilak in Bangalore; Editing by Gopakumar Warrier, Bernard Orr)